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JOINT CIRCULAR No

JOINT CIRCULAR No. 2341/2000/TTLT/BKHCNMT-BTC OF NOVEMBER 28, 2000 GUIDING THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE No. 119/1999/ND-CP OF SEPTEMBER 18, 1999 ON A NUMBER OF FINANCIAL POLICIES AND MECHANISMS ENCOURAGING ENTERPRISES TO INVEST IN SCIENTIFIC AND TECHNOLOGICAL ACTIVITIES

Pursuant to the Government’s Decree No. 119/1999/ND-CP of September 18, 1999 on a number of financial policies and mechanisms encouraging enterprises to invest in scientific and technological activities (hereafter called Decree No. 119/ND-CP for short);

Pursuant to the current legislation on taxation, finance, science and technology;

The Ministry of Science, Technology and Environment and the Ministry of Finance hereby jointly guide the implementation of financial policies and mechanisms encouraging enterprises to invest in scientific and technological activities according to the provisions of Decree No. 119/1999/ND-CP, as follows:

I. SCOPE OF REGULATION AND SUBJECTS OF APPLICATION

1. Scope of regulation:

Scientific and technological activities to be encouraged under the provisions in Article 1 of Decree No. 119/1999/ND-CP and guided in this Circular include:

1.1. Research and development activities carried out by enterprises on their own or under contracts signed with organizations and individuals at home and abroad.

Research and development activities include the following processes: Basic research, applied research and experimental development.

Boundary between the research - development and the production is determined as follows:

The final stage of research and development activities is to create a new technology and/or new products and to conduct small-scale trial production in order to improve such new technology and/or products before putting them into production and life. When the trial production process goes normally, the research and development stage shall conclude.

1.2. Application of scientific and technological achievements, renewal of technologies and manufacture of new products:

- Application of research and development activities’ results to the reality;

- Application of scientific and technological achievements already acquired through technology transfer;

- Substantial improvement of available technologies;

- Manufacture of new products or existing products with their properties and quality substantially improved.

1.3. Scientific and technological services: Are activities associated with the research and development activities or contributing to the creation, popularization and application of scientific and technological knowledge. Scientific and technological services include:

a/ Services requiring high techniques, such as: Restoration, repair and/or adjustment of machines, equipment, experimental instruments, measuring and control devices, scientific and technical equipment with automatic control device; expertise, testing, quality and standard inspection of materials and products;

b/ Data processing, computing and analysis in direct service of research and development;

c/ Drawing up pre-feasibility and feasibility study reports and environmental impact assessment reports;

d/ Activities related to the protection of industrial property rights and technology transfer, and to the application of new technologies to production, including:

- Activities of protecting inventions and utility solutions;

- Services in support of technology transfer, application of new techniques to the production (selection of technologies, instructions on installation and trial operation of equipment lines, in order to apply transferred technologies, checking and maintenance of machinery, instructions on transferred technological processes, training and fostering of scientific and technological personnel to raise their professional and managerial skills, thus making them capable of firmly grasping the transferred technologies);

e/ Services of information, scientific and technological consultancy, technology management consultancy, business administration consultancy, professional fostering and training for purpose of raising scientific, technological and managerial knowledge.

2. Subjects of application include:

2.1. Enterprises operating under the Domestic Investment Promotion Law (amended), including:

a/ Limited liability companies;

b/ Joint stock companies;

c/ Partnerships;

d/ Private enterprises;

e/ Cooperatives and unions of cooperatives (collectively referred to as cooperatives);

f/ State enterprises;

g/ Enterprises of political organizations, socio-political organizations, professional societies, that have business registrations according to the provisions of law;

h/ Enterprises established by overseas Vietnamese who make direct investment in Vietnam;

i/ Enterprises established by foreigners who permanently reside and make direct investment in Vietnam;

j/ Enterprises established jointly by Vietnamese citizens and overseas Vietnamese or foreigners permanently residing in Vietnam.

2.2. Foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam, including:

a/ Enterprises with 100% of foreign investment capital;

b/ Joint venture enterprises;

c/ Foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam.

3. Conditions to enjoy the preferences:

The subjects defined at Point 2, Section I of this Circular shall enjoy preferences provided for in Decree No. 119/1999/ND-CP when they fully meet the following conditions:

a/ Being enterprises engaged in encouraged scientific and technological activities specified at Point 1, Section I of this Circular;

b/ Having already made tax payment registration;

c/ Operating with the business lines and trades inscribed in their business registrations; and

d/ Observing the prescribed accounting and cost-accounting regime.

II. GUIDANCE ON THE ENTERPRISE INCOME TAX PREFERENCES

1. On preferential enterprise income tax rates:

1.1. Enterprises operating under the Domestic Investment Promotion Law (amended) that are engaged in activities of applying high technologies and/or providing scientific and technological services shall be entitled to the preferential enterprise income tax rates specified in Clause 1, Article 3 of Decree No. 119/1999/ND-CP.

A dossier of application for preferential tax rates shall comprise:

a/ An application for enjoyment of preferential enterprise income tax rates with signature of lawful representative and seal of the enterprise;

b/ The establishment decision (if any) and business registration certificate (notarized copy or copy with signature of the director and the seal of the enterprise);

c/ The written declaration for tax registration;

d/ Comments of the science and technology management body.

Documents to be submitted to the science and technology management body for its comment shall include:

- For each type of enterprise engaged in high-tech application activities (application of technologies for manufacturing high-tech components or parts or advanced technological lines according to the provisions at Point 3, Section I of Circular No. 2345/TT-BKHCNMT of December 4, 1998 "Guiding the identification and recognition of high-tech industrial enterprises operating under the Law on Foreign Investment in Vietnam"):

+ For State enterprises: Feasibility study report or investment report, technical design approved by the competent body, and project’s final settlement or minutes on hand-over of project for putting it into operation (if the final settlement is not made yet);

+ For limited liability companies, joint stock companies and partnerships: Feasibility study report or investment report, technical design approved by the members’ council or the owner, and project’s final settlement or minutes on hand-over of project for putting it into operation (if the final settlement is not made yet);

+ For private enterprises: Technical design, contract and final settlement of the contract for construction investment and installation of equipment and facilities. In case of self-construction, the concerned enterprise shall have to produce invoices and/or vouchers on the purchase of supplies, machinery and equipment, and enumerate those actually installed and used according to the technical design.

+ For cooperatives: Feasibility study report or investment report, technical design approved by the Managing Board, and project’s final settlement or minutes on hand-over of project for putting it into operation (if the final settlement is not made yet);

- For enterprises providing scientific and technological services, the documents shall include:

+ The contract for scientific and technological services;

+ The written final settlement of the contract.

1.2. Foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam, that have investment projects in fields of application and development of high technologies and/or scientific and technological services, shall enjoy preferential enterprise income tax rates provided for in Clause 2, Article 3 of Decree No. 119/1999/ND-CP. The preferential rates shall be specifically inscribed in investment licenses.

For enterprises that had been granted investment licenses before the effective date of Decree No. 119/1999/ND-CP but have not yet had their investment licenses adjusted by the investment licensing bodies shall continue to comply with the provisions of their investment licenses.

In cases where their investment licenses do not state the preferential rates but the enterprises wish to enjoy enterprise income tax preferences according to the provisions of Decree No. 119/1999/ND-CP, they shall have to file their dossiers to the tax authorities directly managing them.

A dossier of requesting to enjoy the preferential tax rates shall comprise:

a/ An application for enjoyment of preferential enterprise income tax rates with signature of lawful representative and seal of the enterprise;

b/ The investment license (notarized copy or copy with the enterprise’s signature and seal);

c/ The written declaration for tax registration;

d/ Comments of the science and technology management body;

Documents to be submitted to the science and technology management body for its comment shall include:

- For enterprises having projects for high-tech application and development (application of technologies for manufacturing high-tech components or parts or advanced technological lines specified at Point 3, Section I of Circular No. 2345/TT-BKHCNMT of December 4, 1998 "Guiding the identification and recognition of high-tech industrial enterprises operating under the Law on Foreign Investment in Vietnam"): Feasibility study report or investment report, technical design approved by the competent body, project’s final settlement or the minutes on hand-over of the project for putting it into operation (if the final settlement has not been made yet);

- For enterprises providing scientific and technological services: The contract for scientific and technological services and the written final settlement of the contract.

2. Enterprise income tax exemption or reduction under the provisions of Article 4 of Decree No. 119/1999/ND-CP:

2.1. Activities exempt from enterprise income tax specified in Clause 1, Article 4 include:

- Income earned from the performance of research and development contracts.

- Income earned from the performance of contracts for technical services in direct service of agriculture, fishery and forestry, including:

+ Supply of new plant varieties (before mass production is permitted), domestic animal breeds which have been created at home or imported (before being recognized as technically advanced breeds), supply of breeds for experiment or regionalization purpose;

+ Plant protection services (for agricultural, forestry, medicinal plants...);

+ Services of animal disease prevention and combat (veterinary service, services of disease prevention and combat for cattle, poultry or aquacultural products);

+ Technical instructions and popularization on: Cultivation, intensive crop farming, processes of raising cattle, poultry and aquatic products, preserving and processing agricultural, forest and aquatic products;

+ Consultancy on survey, planning and inspection of quality of irrigation works in direct service of agriculture;

+ Mapping activities in service of the planning of agriculture, forestry and aquaculture;

+ Analysis of agro-chemical and pedological conditions and products’ quality in direct service of those engaged in agricultural, forestry or aquacultural production;

+ Other agriculture, forestry and fishery promotion activities.

- Income earned from capital contribution with the intellectual property rights, technical know-hows and/or technological processes.

A dossier of application for enterprise income tax exemption shall comprise:

a/ An application for enterprise income tax exemption with the signature of the lawful representative and the seal of the enterprise;

b/ The establishment decision (if any) and the business registration certificate (notarized copy or copy with the enterprise’s signature and seal) or the investment license;

c/ The written declaration for tax registration;

d/ Comments of the science and technology management body;

Documents to be submitted to the science and technology management body for its comments shall comprise:

The contract, the written final settlement of the research and development contract, the contract for technical services in direct service of agriculture, forestry or fishery, or the written record on capital contribution with intellectual property rights, technical know-hows and/or technological processes, together with titles deeds thereof.

2.2. Additional income tax exemption as provided for in Clause 2, Article 4

Enterprises eligible for preferences specified in Decree No. 119/ND-CP shall not have to pay additional income tax for their extra income brought about by objective advantages of scientific and technological activities, according to the provisions in Clause 1, Article 10 of the Enterprise Income Tax Law.

2.3. Enterprise income tax exemption and reduction as provided for in Clause 3, Article 4

A dossier of application for enterprise income tax exemption or reduction shall comprise:

a/ An application for enterprise income tax preference with the signature of the lawful representative and the seal of the enterprise;

b/ The establishment decision (if any) and the business registration certificate (notarized copy or copy with the enterprise’s signature and seal);

c/ The written declaration for tax registration;

d/ Comments of the science and technology management body;

Documents to be submitted by each type of enterprises to the science and technology management body for its comments shall comply with the provisions at Point 1.1-d, Section II of this Circular.

e/ The financial settlement report and the enterprise income tax settlement report of the business establishment for the year preceding the investment year and the year following the investment year, for which it applies for tax exemption or reduction. The enterprise shall base itself on the tax exemption or reduction level to calculate and separately account its extra income brought about by the new investment, the tax amount to be exempted or reduced and the payable tax amounts for each period as well as for the whole year, then make the tax final settlement with the tax authorities as prescribed. In cases where the enterprise cannot separately account its taxable extra income earned through the investment in scientific and technological services, formation of new production lines, expansion or technological renewal, the taxable extra income shall be determined on the basis of proportion of increased investment value to the total value of the enterprise’s existing fixed assets.

Annually, upon making final settlement of enterprise income tax, the tax authorities shall officially determine the enterprise income tax amounts to be exempted or reduced.

2.4. Enterprise income tax exemption or reduction for foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam according to the provisions in Clause 4, Article 4:

A dossier of application for enterprise income tax exemption or reduction shall comprise:

a/ An application for entitlement of enterprise income tax preference with the signature of the lawful representative and the seal of the enterprise;

b/ The investment license and the business registration certificate, if any (notarized copy or copy with the enterprise’s signature and seal);

c/ The written declaration for tax registration;

d/ Comments of the science and technology management body;

Documents to be submitted to the science and technology management body for its comments shall comprise:

Feasibility study report or investment report, technical design approved by the competent body, the project’s final settlement or the minutes on hand-over of the project for putting it into operation (if the final settlement has not yet been made);

In cases where the enterprise uses its shared income for reinvestment, the conditions, percentage and calculation formula for reimbursement of the paid income tax shall comply with the guidance in Part II, Section I, Point 6 of the Finance Ministry’s Circular No. 89/1999/TT-BTC of July 16, 1999 guiding taxation matters for investment forms under the Law on Foreign Investment in Vietnam.

2.5. The order and time limit for considering the enterprise income tax exemption or reduction:

a/ Within 10 days after receiving complete and valid dossiers asking for its comments, the science and technology management body shall have to give its comments to the concerned enterprises.

b/ Within 30 days after receiving complete dossiers of application for enterprise income tax preferences submitted by enterprises, the tax authority directly managing such enterprises shall have to notify the concerned enterprises of the tax preference levels provided for in Decree No. 119/1999/ND-CP. In cases where an enterprise’s dossier is found invalid or such enterprise is not among the right subjects specified in Decree No. 119/1999/ND-CP and guided in Section I of this Circular, the tax authority shall, within 15 days after receiving such a dossier, have to notify the concerned enterprise thereof.

III. GUIDANCE ON EXEMPTION OR REDUCTION OF LAND USE LEVY, LAND RENTAL, LAND USE TAX

1. Enterprises operating under the Domestic Investment Promotion Law (amended) that invest in scientific and technological activities specified at Point 1, Section I of this Circular shall enjoy land use preferences for assigned land or leased land for construction of scientific and technological research establishments, laboratories, stations or experiment workshops according to the provisions in Clause 1, Article 5 of Decree No. 119/1999/ND-CP.

Land use tax prescribed in Clause 1-c, Article 5 of Decree No. 119/1999/ND-CP includes: Agricultural land use tax prescribed in the Agricultural Land Use Tax Law passed by the National Assembly on July 10, 1993 and the housing and land tax prescribed in the Housing and Land Tax Ordinance promulgated by the State Council (now the National Assembly Standing Committee) on July 31, 1992 and documents guiding the implementation thereof.

A dossier of application for exemption or reduction of land use levy, land rental and/or land use tax shall comprise:

a/ The written request of the enterprise;

b/ The establishment decision (if any) and the business registration certificate (notarized copy or copy with the enterprise’s signature and seal);

c/ The written declaration for tax registration;

d/ The competent State body’s land assignment decision or the land rent contract;

e/ Comments of the science and technology management body;

Documents to be submitted by each type of enterprises to the science and technology management body for its comments shall comply with the provisions at Point 1.1-d, Section II in this Circular.

2. Foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam shall enjoy land rental preference for the land area they rent for the construction of laboratories, trial production workshops or for research - development activities or experiments according to the provisions of the current law.

A dossier of application for enjoyment of land rental preferences shall comprise:

a/ An application for enjoyment of land rental preferences provided for by the current legal documents on land rental applicable to foreign investment in Vietnam, with the signature of the lawful representative and the seal of the enterprise;

b/ The investment license (notarized copy or copy with the enterprise’s signature and seal);

c/ The written declaration for tax registration;

d/ The certificate of the right to use the rented land (notarized copy or copy with the enterprise’s signature and seal);

e/ Comments of the science and technology management body;

Documents to be submitted to the science and technology management body for its comments shall include:

The feasibility study report or investment report, the technical design approved by the competent body, the project’s final settlement or the minutes on hand-over of the project for putting it into operation (if the final settlement has not yet been made);

3. The order and time limits for considering the exemption or reduction of land use levy, land rental and land use tax:

The science and technology management body shall have to give its comments within the time limit prescribed at Point 2.5-a, Section II of this Circular.

The tax authority directly managing land use levy, land rental and land use tax, after receiving valid dossiers of application for exemption or reduction of land use levy, land rental and/or land use tax shall, within 30 days, have to issue decisions on exemption or reduction, stating the land use levy, land rental and/or land use tax exemption or reduction duration.

For case of agricultural land use tax exemption or reduction, the directly managing tax authority, if deeming that the prescribed conditions are fully met, shall, within 10 days, have to forward the dossiers enclosed with its written requests to the provincial/municipal Tax Department for consideration. Within 20 days, the provincial/municipal Tax Department shall have to propose the People’s Committee of the province or centrally-run city to issue a decision on land use tax exemption or reduction for each specific case.

In cases where dossiers of application for land use levy, land rental and/or land use tax exemption or reduction are invalid or incomplete, the tax authority shall, within 15 days after receiving such dossiers, have to notify the concerned enterprises thereof.

IV. GUIDANCE ON IMPORT TAX EXEMPTION

The subjects defined at Point 2, Section I of this Circular that import machinery, equipment, details’ group, raw materials and materials, scientific and technical equipment with automatic control device, test samples, measuring and experimental instruments in direct service of research and development projects and contracts which have not yet been domestically manufactured or have been domestically manufactured but fail to meet the qualitative and quantitative requirements, shall be exempt from import tax according to the provisions of Article 6 of Decree No. 119/1999/ND-CP.

A dossier of application for import tax exemption shall comprise:

a/ The enterprise’s written request for import tax exemption for machinery, equipment, raw materials and materials, scientific and technical equipment with automatic control device, test samples, measuring and experimental instruments in direct service of research and development projects and contracts, clearly stating the quantity and value thereof as well as its commitment to use such for the right purposes;

b/ The investment license or business registration granted by the competent body;

c/ Comments of the science and technology management body on the research and development subject, contract and project, which clearly inscribe that exempt from import tax are machinery, equipment, raw materials and materials, scientific and technical equipment with automatic control device, test samples, measuring and experimental instruments... in direct service of research and development projects and contracts, and are enclosed with the dossier of such research and development project or contract;

d/ The plans for import of machinery, equipment, raw materials and materials... in direct service of the enterprise’s research and development subject, contract and project;

e/ The import entrustment contract (for entrusted imports).

Basing itself on the above-said dossier, comparing it with the list of raw materials, materials, machinery and equipment that can be manufactured at home according to the current regulations, the Customs Department of the locality where the enterprise registers for filling in the goods import procedures shall monitor and carry out the procedures for import tax exemption for each specific goods shipment. Quarterly, the provincial/municipal Customs Departments shall have to sum up and report on the total value of imported goods and volumes of main import items which are exempt from import tax to the General Department of Customs, the Ministry of Finance and the Ministry of Science, Technology and Environment.

V. GUIDANCE ON CREDIT PREFERENCES

Enterprises operating under the Domestic Investment Promotion Law (amended) and engaged in activities specified at Point 1, Section I of this Circular shall be entitled to borrow medium-term and long-term loans with preferential interest rates. Up to 70% of their investment capital may be borrowed from the Development Assistance Fund and the Scientific and Technological Development Assistance Fund.

In cases where an enterprise is guaranteed by the Development Assistance Fund to borrow medium-term and long-term loans from the Investment and Development Bank, it shall be given post-investment interest rate support by the Development Assistance Fund.

Enterprises that borrow bank loans for production of scientific products for export (computer software, technologies...) shall be given loan interest rate supports by the Export Assistance Fund.

The procedures and order for loan-borrowing guaranty, borrowing loans with preferential interest rates, post-investment interest rate supports and bank loan interest rate supports shall comply with the provisions of the Charters of the Development Assistance Fund, the Export Assistance Fund and the Scientific and Technological Development Assistance Fund and the current legislation on operation of credit institutions.

VI. GUIDANCE ON APPLICATION OF OTHER INCENTIVE POLICIES

1. Guidance on preferences for the use of technologies being outcome of scientific and technological research projects funded with the State budget as specified in Clause 1, Article 8 of Decree No. 119/ND-CP:

Enterprises that use technologies being the outcomes of scientific and technological research projects funded by the State budget (except for technologies involved in national defense or security secrets and other industrial property objects currently under protection) shall have to pay only remuneration to the authors who have invented such technologies. The remuneration level to be paid to the authors shall be equal to 30% of the technology transfer price specified in Clauses 3 and 4, Article 23 of the Government’s Decree No. 45/1998/ND-CP of July 1, 1998 detailing the technology transfer and the Ministry of Science, Technology and Environment’s Circular No. 1245/1999/TT-BKHCNMT of July 12, 1999 guiding the implementation of the Government’s Decree No. 45/1998/ND-CP of July 1, 1998 detailing the technology transfer.

Authors of technologies which are results of scientific research projects with funds invested by the State budget referred to in this Circular are individuals being managers of such projects and the collectives that have directly engaged in the scientific research and named in the list of principal coordinated performers inscribed in the "Registration certificates of results of scientific and technological research projects" granted by the Ministry of Science, Technology and Environment.

2. Guidance on the provision of support funds for enterprises to execute their research projects on creating new technologies in branches, trades or fields, which are prioritized by the State according to the provisions in Clause 2, Article 8 of Decree No. 119/ND-CP:

2.1. Objects of support:

In addition to scientific research projects for which enterprises have taken part in the selection under the general regulations, and tasks ordered by the State, if such enterprises have scientific research projects on creating new technologies in branches or trades prioritized and encouraged by the State (according to the appendix to this Circular), which are executed by the enterprises themselves or in coordination with scientific institutions, they shall be provided funding supports by the State, which, however, shall not exceed 30% of the total funding for project execution.

2.2. Organization of consideration and selection:

Annually, the Ministry of Science, Technology and Environment shall publicize on the mass media the list of scientific and technological research fields involved in branches and trades prioritized and encouraged by the State, which are to be executed by enterprises themselves or in coordination with scientific institutions, as well as the time limit for submitting applications for the State’s support funds for scientific research activities.

The concerned enterprises shall base themselves on their scientific research tasks in service of production and business and the list of scientific and technological research fields encouraged by the State, to compile and file dossiers of application for the State’s support funds.

A dossier of application for support funds shall comprise:

a/ An application requesting the Ministry of Science, Technology and Environment to consider the provision of support funds for scientific research, made according to the set form.

b/ A scientific research outline made according to the form uniformly set by the Ministry of Science, Technology and Environment.

The Ministry of Science, Technology and Environment shall coordinate with the concerned ministries and branches in setting up specialized evaluation councils to assess the scientism and feasibility of projects and evaluate the total funding estimates for projects’ execution, which shall serve as basis for considering and providing support funds for enterprises executing scientific research projects, provided that the support funds shall not exceed 30% of the total funding for execution of enterprises’ projects.

Basing itself on the annual non-business scientific funding source reserved for support for enterprises’ scientific research projects and results reported by the specialized evaluation councils, the Ministry of Science, Technology and Environment shall decide the list of enterprises’ scientific research projects to be provided with support funds as well as the support level for each scientific research project.

Scientific research projects of enterprises that file applications for the State’s support funds, which are coincident with scientific research projects being currently executed or having been successfully completed by all levels with the State budget’s funding shall not be considered by the Ministry of Science, Technology and Environment for support funds. The Ministry of Science, Technology and Environment shall have to notify the concerned enterprises of such coincidence.

2.3. Tasks and responsibilities of the management bodies and enterprises provided with scientific research funds

After being notified of the State’s support funds for their scientific research projects, the enterprises shall have to open deposit accounts at the State Treasury branches in localities, where their head offices are located, according to the regulations of the directors of the State Treasury’s branches of the provinces and centrally-run cities and notify the Finance Ministry of their treasury accounts’ serial numbers for provision of support funds.

The Ministry of Science, Technology and Environment and the enterprises provided with support funds shall have to sign contracts according to the set form for performance.

The enterprises shall have to observe the spending regime applicable to non-business scientific funds strictly according to the current regulations on finance for scientific and technological activities. Such support funds shall not be taxed.

The Ministry of Science, Technology and Environment shall coordinate with the concerned functional bodies in inspecting the use of support funds for the right purposes and with efficiency. In cases where an enterprise is detected having used support funds for wrong purpose(s), the fund provider may suspend the fund provision or recover the already provided funds.

Annually, the enterprises provided with funds shall have to make periodical reports according to the set form and send them to the Ministry of Science, Technology and Environment and the Ministry of Finance. On the basis of such reports, the fund-providing bodies shall decide to continue the fund provision according to the approved plans.

Upon the completion of their scientific research projects, the enterprises taking prime charge of such scientific research projects shall organize the pre-acceptance assessment of the achieved scientific and technological results and the use of support funds from the State budget. Within 15 days after the Pre-acceptance Assessment Council makes its conclusions, the enterprises shall have to send reports on the scientific research projects’ results made according to the set form, enclosed with the minutes of the Pre-acceptance Assessment Council to the Ministry of Science, Technology and Environment, then the enterprises shall organize the liquidation of contracts.

The enterprises may request the bodies related to the provision of support funds from the budget to protect information involved in the scientific research projects they are executing in their interests.

3. Guidance on the use of after-tax extra-income earned from the application of new technologies as prescribed in Clause 3, Article 8:

Enterprises operating under the State Enterprises Law shall be entitled to deduct 50% of their after-tax extra-income earned from the application of new technologies to invest in scientific and technological activities and give rewards to individuals and/or collectives inside or outside such enterprises that have made merits in the research into, creation and organization of application of such new technologies.

The reinvestment in scientific and technological activities includes the following activities: Building of material foundations in service of research and development activities as well as scientific and technological service establishments, procurement of scientific facilities and equipment, scientific and technological documents, conducting of scientific research, training and fostering of cadres to make them firmly grasp scientific and technological knowledge...

The deduction for rewards shall be made annually as from the time the extra-income is generated thanks to the application of new technologies. The maximum deduction duration shall not exceed 3 years after the extra-income is generated. Where profits are not earned in any year, no reward deduction shall be made.

VII. ORGANIZATION OF IMPLEMENTATION

1. Determination of geographical areas with difficult socio-economic conditions and those with particularly difficult socio-economic conditions:

The determination of geographical areas with difficult socio-economic conditions and those with particularly difficult socio-economic conditions specified in lists B and C of the Government’s Decree No. 51/1999/ND-CP of July 8, 1999.

2. Regarding the subjects eligible for preferences provided for in Decree No. 119/1999/ND-CP:

- In cases where investors of projects for investment in scientific and technological activities, after enjoying the preferences of various levels, are changed, the new investors shall continue enjoying such preferences for the remaining execution duration and shall have to fulfill the previous investors’ obligations in order to enjoy the preferences.

- In cases where enterprises, which have been enjoying preferences under conditions already registered for their scientific and technological activities, during the course of project execution, experience a change in the already registered conditions, thus leading to the alteration of preferences according to Decree No. 119/1999/ND-CP, they shall, within 5 days, have to declare such to the competent bodies for readjustment of preference levels.

- Enterprises, which commit fraudulent acts to enjoy preferences of various levels according to Decree No. 119/ND-CP and this Circular’s guidance, or intentionally fail to declare change in conditions for investment in scientific and technological activities to continue enjoying the preferences, shall, besides having to reimburse all preferences, be administratively sanctioned or examined for penal liability according to the provisions of law, depending on the seriousness of their violations.

- In cases where an enterprise enjoys different regimes of preferences provided for in different legal documents, it may choose an appropriate preference level.

3. Regarding the tax authorities, the finance agencies and the science and technology management bodies:

- The tax authorities, the finance agencies and the science and technology management bodies shall have to create favorable conditions for enterprises to invest in scientific and technological activities and promptly detect and prevent acts of taking advantage of their scientific and technological activities to enjoy preferences of various levels provided for in Decree No. 119/ND-CP and this Circular’s guidance.

- The Ministry of Science, Technology and Environment shall give its written comments on research and development contracts and projects valued at VND 100 million or more, scientific and technological service contracts and contracts for technical services in direct service of agriculture valued at VND 200 million or more, and cases of capital contribution with intellectual property rights, technical know-hows, technological processes and group-A projects for investment in scientific and technological activities.

- The Services of Science, Technology and Environment of the provinces and centrally-run cities, where enterprises invest in scientific and technological activities other than those specified above, shall give their comments on such scientific and technological activities.

- Officials and public employees who abuse their positions and powers, intentionally acting against the provisions of Decree No. 119/1999/ND-CP and this Circular’s guidance, thus causing losses to the State budget shall, depending on the seriousness of their violations, be disciplined, administratively sanctioned or examined for penal liability according to the provisions of law.

4. This Circular takes effect as from the effective date of the Government’s Decree No. 119/1999/ND-CP of September 18, 1999.

The previous stipulations which are contrary to this Circular are now all annulled.

Any problems arising in the course of implementation should be promptly reported by enterprises, branches and localities to the Ministry of Finance and the Ministry of Science, Technology and Environment for study and additional guidance.

For the Minister of Science, Technology and Environment

Vice Minister
BUI MANH HAI

For the Finance Minister

Vice Minister
TRAN VAN TA

Appendix

LIST OF PRIORITY SCIENTIFIC AND TECHNOLOGICAL FIELDS WHERE THE STATE ENCOURAGES ENTERPRISES TO CONDUCT RESEARCH

- Research into the creation of new products for export or used as substitutes for imported new materials, precious and rare materials, materials with special properties.

- Research into the creation of new bio-technologies to produce plant varieties and animal breeds, medicinal drugs for human being, domestic animals and crops, which are of high quality, international standards and high economic efficiency.

- Research into the creation of advanced technological lines and technologies for manufacturing components and parts with high technical content.

- Research into the creation of production technologies with the consumption of less fuels, raw materials and materials than the existing technologies.

- Research into technology(ies) for treating pollution and protecting the environment, and technologies for treating and processing solid, liquid and gaseous waste.-